Monday, February 16, 2015

China's Odd Corn Import Diversification

In 2012, Chinese officials were alarmed to discover that 99% of the country's corn imports came from the United States. They immediately rushed out to sign up Ukraine and Argentina as corn suppliers. Later, they signed up Bulgaria.

An article reviewing China's 2014 corn imports concludes that China did indeed diversify its corn imports. Corn imports were down 20% during 2014, and all of the decrease reflected reduced imports from the United States due to rejections over the MIR162 issue. Imports from Ukraine, Thailand, Laos, and Myanmar increased. The Guoji Shangbao (Global Business News) article announced that the U.S. share of China's corn imports fell to 40%, "comparable to the proportion from Ukraine."
Source: dim sums analysis of Chinese customs statistics.
This is a curious strategy for a country obsessed with "food security." The largest and most reliable corn supplier in the world is knocking on your door, offering to sell you as much corn as you want. So you rush out to sign agreements with regimes with a history of political instability and debt crisis. You make a multi-year commitment to a country that has an actual war in its territory threatening its crops and make it your featured new corn-supplier.
So maybe China was worried that the United States would use its monopoly position as a corn-supplier to gouge Chinese buyers. But now the Chinese government is using its monopoly position to force its corn buyers to pay twice as much for corn as their competitors in other countries, so maybe Chinese officials are not all that concerned about price-gouging.
In reality, a monopoly over a particular commodity is hard to establish because there are substitutes. Chinese officials may not have realized that there are substitutes for corn. Imports of distillers dried grains, sorghum, and barley have poured in...and the United States was the main supplier. China managed to break the U.S. monopoly of its corn imports by brute force, but instead the U.S. supplied China with 11.2 mmt of sorghum and DDGS.
Note: combined imports of distillers dried grains (DDGS), sorghum, and barley.
Source: dim sums analysis of Chinese customs statistics.
So, what did China accomplish by banning U.S. corn for a year? The Ministry of Agriculture has approved the MIR162 corn variety, so this type of corn will enter the Chinese market after all. They equalized the shares of U.S. and Ukrainian corn imports last year, but created a big market for feed-quality sorghum, barley, and DDGS. 

1 comment:

Deb C said...

I'm curious if you have these graphs with the 2015 import data in them as well? Or is there a way that I can contact you to find out where these data sets come from?